State Bank Corp. Reports Earnings of $1.48 Million, or $0.18 per Diluted Share, in 2Q17; Total Assets Exceed $600 Million

LAKE HAVASU CITY, Ariz., July 25, 2017 (GLOBE NEWSWIRE) -- State Bank Corp. (OTCPink:SBAZ) (“Company”), the holding company for Mohave State Bank (“Bank”), today announced net income increased 3.2% to $1.48 million, or $0.18 per diluted share, for the second quarter ended June 30, 2017, compared to $1.43 million, or $0.18 per diluted share, in the first quarter of 2017, and increased 51.9% compared to $974,000, or $0.17 per diluted share, for the second quarter of 2016.

For the first six months of 2017, net income grew 73.9% to $2.91 million, or $0.36 per diluted share, compared to $1.67 million, or $0.29 per diluted share, for the same period of 2016.

“We continue to focus on maximizing our post-merger performance,” stated Brian M. Riley, President and Chief Executive Officer. “Our basic business fundamentals are improving as loans and deposits have significantly increased. Our second quarter and year-to-date profits reflect solid loan production, along with our ability to attract and retain core deposits. The increase in loans and deposits, both from organic growth and the acquisition of Country Bank completed in 3Q16, has strengthened our net interest income and contributed to our healthy net interest margin. We are positioning ourselves to expand our geographic footprint and build additional earnings capacity. We are looking forward to delivering future results as economic conditions in our market areas remain strong.”

“A highlight of the quarter was the sale of our largest other real estate owned (OREO) property, which reduced OREO by 74% during the quarter,” added Riley.

Second Quarter 2017 Financial Highlights:

Net income, excluding merger related expenses, was $1.51 million, or $0.19 per diluted share.
Sale of the Bank’s largest OREO property, resulting in total OREO balances of less than $1 million.
Resolution of a large credit relationship resulting in a loan loss recovery of $492,000.
Non-performing assets fell to 0.62% of total assets, representing the lowest level since 2Q07.
Return on average assets, excluding merger related expenses, was 1.01%.
Return on average equity, excluding merger related expenses, was 10.70%.

Net interest margin was 3.84% in the second quarter 2017 compared to 3.89% in the preceding quarter and 3.85% in the second quarter a year ago.

There was a negative provision for loan losses in the second quarter of $440,000, with net recoveries of $456,000. The allowance for loan losses totaled $3.0 million at June 30, 2017, or 0.89% of total loans. Excluding acquired loans, the reserve ratio was 1.12%, in line with industry peers. On the acquired portfolio, the credit component of the loan purchase discount remains greater than an imputed reserve.

Total assets were $603.4 million at June 30, 2017, an increase of $20.2 million, or 3.5%, from $583.2 million at December 31, 2016, and an increase of $256.9 million, or 74.1%, compared to $346.5 million a year ago. Total loans held for investment were $335.5 million as compared to $323.2 million at December 31, 2016, and $216.0 million at June 30, 2016. Total loan comparisons were affected by the addition of $107.0 million in loans from the acquisition of Country Bank, closed in August of 2016.

Total deposits were $534.0 million, an increase of $17.5 million, or 3.4%, from $516.5 million at December 31, 2016, and an increase of $239.0 million, or 81.0%, compared to $295.0 million a year ago. Core deposits, defined as noninterest bearing demand, money market, NOW and savings accounts, increased 5.00% compared to three months earlier and increased 97.3% compared to a year earlier to $465.1 million at June 30, 2017. Total deposits and core deposit comparisons were affected by the acquisition of Country Bank by $202.2 million and $186.6 million, respectively. Core deposits now comprise 87.1% of total deposits.

Non-performing assets were $3.8 million at June 30, 2017, a 37.7% decrease from $6.1 million at December 31, 2016. Nonperforming assets represented 0.62% of total assets at June 30, 2017, which represents its lowest level since fourth quarter 2007.

Shareholder equity increased to $56.9 million at June 30, 2017, from $53.8 million at December 31, 2016. At June 30, 2017, tangible book value per share was $6.13 per share compared to $5.76 per share at December 31, 2016.

Capital Management

Community banking organizations, including State Bank Corp. and Mohave State Bank, became subject to new capital requirements on January 1, 2015, and certain provisions of the new rules will be phased in from 2015 through 2019. The Company’s consolidated capital ratios and the Bank’s capital ratios exceeded the regulatory guidelines for a well-capitalized financial institution under the Basel III and Dodd Frank Wall Street Reform requirements at June 30, 2017. The Bank reported the following capital ratios at March 31, 2017:

Common Equity Tier 1 Capital Ratio			13.56%

Tier 1 Leverage Ratio			9.65%

Tier 1 Capital Ratio			13.56%

Total Capital Ratio			14.27%

Use of Non-GAAP Financial Information

This press release contains both financial measures based on accounting principles generally accepted in the United States (“GAAP”) and non-GAAP based financial measures, which are used where management believes this disclosure can be helpful in understanding the Company’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

About the Company

State Bank Corp., headquartered in Lake Havasu City, Arizona, is the parent company of Mohave State Bank, the largest community bank headquartered in Arizona. Mohave State Bank is a full-service bank providing deposit and loan products, and convenient on-line banking to individuals, businesses and professionals. The Bank was established in October 1991, and the holding company was formed in 2004. The Bank has nine full-service branches: two in Lake Havasu City, two in Kingman, two in Prescott, one in Bullhead City, one in Prescott Valley, and one in Cottonwood, Arizona. The Company is traded over-the-counter as SBAZ. For further information, please visit the web site: www.mohavestbank.com.

Forward-looking Statements

This press release may include forward-looking statements about State Bank Corp. and Mohave State Bank. These statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors: the expected cost savings, synergies and other financial benefits from the merger might not be realized within the expected time frames or at all.; Annualized, pro forma, projected and estimated numbers in this press release are used for illustrative purposes only, are not forecasts and may not reflect actual results. All forward-looking statements included in this press release are based on information available at the time of the release, and State Bank Corp. and Mohave State Bank assume no obligation to update any forward-looking statements.

UNAUDITED FINANCIAL STATEMENTS FOLLOW

State Bank Corp.
Statement of Operations

		For the Quarter Ended							Year to Date
Dollars in thousands - Unaudited		6/30/2017			3/31/2017		6/30/2016		6/30/2017			6/30/2016
Statements of Operations
	Interest income
	Loans, including fees	$	4,816		$	4,765	$	2,980	$	9,581		$	5,936
	Securities		653			582		221		1,235			436
	Fed funds and other		89			70		59		159			94
	Total interest income		5,558			5,417		3,260		10,975			6,466

	Interest expense
	Deposits		171			184		162		355			315
	Borrowings		105			102		95		207			128
	Total interest expense		276			286		257		562			443

	Net interest income		5,282			5,131		3,003		10,413			6,023

	Provision for loan losses		(440	)		-		-		(440	)		-
	Net interest income after loan loss provision		5,722			5,131		3,003		10,853			6,023

	Noninterest income
	Service charges on deposits		138			139		78		277			157
	Mortgage loan fees		380			343		291		723			464
	Gain on sale of loans		400			447		357		847			530
	(Loss)/Gain on securities		-			-		-		-			-
	Other income		457			283		196		740			364
	Total noninterest income		1,375			1,212		922		2,587			1,515

	Noninterest expense
	Salaries and employee benefits		2,586			2,483		1,430		5,069			2,760
	Net occupancy expense		154			159		56		313			109
	Equipment expense		100			93		39		193			79
	Data processing		429			428		241		857			483
	Director fees & expenses		78			43		33		121			77
	Insurance		32			32		30		64			61
	Marketing & promotion		139			128		54		267			132
	Professional fees		129			93		95		222			255
	Office expense		34			65		27		99			77
	Regulatory assessments		47			79		52		126			111
	OREO and repossessed assets		594			25		43		619			96
	Other expenses		437			442		152		879			368
			4,759			4,070		2,252		8,829			4,608

	Acquisition related costs		40			52		63		92			241

	Total noninterest expense		4,799			4,122		2,315		8,921			4,849

	Income (loss) before provision (benefit) for income taxes		2,298			2,221		1,610		4,519			2,689

	Provision (benefit) for income taxes		818			788		636		1,606			1,015
	Net Income (Loss)	$	1,480		$	1,433	$	974	$	2,913		$	1,674


Per Share Data
	Basic EPS	$	0.18		$	0.18	$	0.17	$	0.36		$	0.29
	Diluted EPS	$	0.18		$	0.18	$	0.17	$	0.36		$	0.29

	Average shares outstanding
	Basic		8,039,567			8,029,691		5,842,145		8,034,656			5,842,145
	Effect of dilutive shares		19,767			-		-		9,938			-
	Diluted		8,059,334			8,029,691		5,842,145		8,044,594			5,842,145

State Bank Corp.
Balance Sheets


Dollars in thousands - Unaudited		6/30/2017			3/31/2017			12/31/2016			6/30/2016
Consolidated Balance Sheets

Assets
	Cash and cash equivalents	$	3,023		$	3,130		$	5,202		$	2,650
	Interest bearing deposits		10,292			17,495			24,524			2,047
	Overnight Funds		43,860			33,425			33,680			46,265
	Held for maturity securities		1			2			2			15
	Available for sale securities		169,125			159,335			147,574			52,366
	Total cash and securities		226,301			213,387			210,982			103,343

	Loans held for sale, before reserves		3,205			2,524			5,870			5,626
	Gross loans held for investment		335,454			333,039			323,210			216,002
	Loan loss reserve		(3,001	)		(2,986	)		(3,058	)		(3,103	)
	Total net loans		335,658			332,577			326,022			218,525

	Premises and equipment, net		14,828			14,965			15,071			8,083
	Other real estate owned		836			3,261			3,955			4,039
	Federal Home Loan Bank and other stock		3,867			3,307			3,308			2,281
	Company owned life insurance		11,410			11,343			11,275			6,114
	Other assets		10,451			11,436			12,554			4,073

	Total Assets	$	603,351		$	590,276		$	583,167		$	346,458


Liabilities
	Non interest bearing demand	$	119,116		$	120,191		$	116,696		$	75,295
	Money market, NOW and savings		346,022			332,047			326,269			160,436
	Time deposits <$250K		62,948			64,574			67,845			26,067
	Time deposits >$250K		5,933			5,651			5,688			33,212
	Total Deposits		534,019			522,463			516,498			295,010

	Securities sold under repurchase agreements		3,263			3,942			4,188			3,767
	Federal Home Loan Bank advances		-			-			-			-
	Subordinated debt, net of debt issuance costs		7,348			7,341			7,336			7,500
	Total Debt		10,611			11,283			11,524			11,267

	Other Liabilities		1,826			1,420			1,366			952
	Total Liabilities		546,456			535,166			529,388			307,229


Shareholders' Equity
	Common stock		39,255			39,146			39,146			24,927
	Accumulated retained earnings		18,140			16,942			15,791			13,971
	Accumulated other comprehensive income		(500	)		(978	)		(1,158	)		331
	Total shareholders equity		56,895			55,110			53,779			39,229

	Total liabilities and shareholders' equity	$	603,351		$	590,276		$	583,167		$	346,458

State Bank Corp.
Five-Quarter Performance Summary

		For the Quarter Ended
Dollars in thousands - Unaudited		6/30/2017			3/31/2017			12/31/2016			9/30/2016			6/30/2016
Performance Highlights

Earnings:
	Total revenue (Net int. income + nonint. income)	$	6,657		$	6,349		$	6,303		$	5,733		$	3,925
	Net interest income	$	5,282		$	5,137		$	5,070		$	4,765		$	3,003
	Provision for loan losses	$	(440	)	$	-		$	-		$	-		$	-
	Noninterest income	$	1,375		$	1,212		$	1,233		$	968		$	922
	Noninterest expense	$	4,799		$	4,128		$	4,911		$	3,709		$	2,315
	Net income (loss)	$	1,480		$	1,433		$	911		$	1,190		$	974

Per Share Data:
	Net income (loss), basic	$	0.18		$	0.18		$	0.11		$	0.16		$	0.17
	Net income (loss), diluted	$	0.18		$	0.18		$	0.11		$	0.16		$	0.17
	Cash dividends declared	$	0.035		$	0.035		$	0.035		$	-		$	-
	Book value	$	7.07		$	6.86		$	6.70		$	6.79		$	6.71
	Tangible book value	$	6.13		$	5.90		$	5.76		$	5.83		$	6.71

Performance Ratios:
	Return on average assets		0.99	%		0.98	%		0.62	%		0.91	%		1.13	%
	Return on average equity		10.51	%		10.48	%		6.77	%		9.69	%		10.05	%
	Net interest margin, taxable equivalent		3.84	%		3.89	%		3.85	%		4.14	%		3.85	%
	Average cost of funds		0.21	%		0.21	%		0.23	%		0.29	%		0.34	%
	Average yield on loans		5.68	%		5.73	%		5.81	%		6.68	%		5.38	%
	Efficiency ratio		72.09	%		65.02	%		77.92	%		64.70	%		58.98	%
	Non-interest income to total revenue		20.65	%		19.09	%		19.56	%		16.88	%		23.49	%

Capital & Liquidity:
	Total equity to total assets (EOP)		9.43	%		9.34	%		9.22	%		9.08	%		11.32	%
	Tangible equity to tangible assets		9.43	%		9.34	%		8.03	%		7.90	%		11.32	%
	Total loans to total deposits		63.41	%		64.23	%		63.71	%		62.91	%		75.13	%
	Mohave State Bank
	Common equity tier 1 ratio		13.56	%		13.24	%		13.17	%		12.95	%		14.62	%
	Tier 1 leverage ratio		9.65	%		9.63	%		9.40	%		10.55	%		11.08	%
	Tier 1 risk based capital		13.56	%		13.24	%		13.17	%		12.95	%		14.62	%
	Total risk based capital		14.27	%		13.95	%		13.90	%		13.67	%		15.81	%

Asset Quality:
	Gross charge-offs	$	59		$	84		$	-		$	67		$	4
	Net charge-offs (NCOs)	$	(456	)	$	73		$	(11	)	$	56		$	(5	)
	NCO to average loans, annualized		-0.54	%		0.09	%		-0.01	%		0.08	%		-0.01	%
	Non-accrual loans/securities	$	2,923		$	1,872		$	2,185		$	2,321		$	2,683
	Other real estate owned	$	836		$	3,261		$	3,955		$	4,398		$	4,039
	Repossessed assets	$	-		$	-		$	-		$	-		$	-
	Non-performing assets (NPAs)	$	3,759		$	5,133		$	6,140		$	6,719		$	6,722
	NPAs to total assets		0.62	%		0.87	%		1.05	%		1.12	%		1.94	%
	Loans >90 days past due	$	-		$	-		$	-		$	-		$	-
	NPAs + 90 days past due	$	3,759		$	5,133		$	6,140		$	6,719		$	6,722
	NPAs + loans 90 days past due to total assets		0.62	%		0.87	%		1.05	%		1.12	%		1.94	%
	Allowance for loan losses to total loans		0.89	%		0.89	%		0.93	%		0.91	%		1.40	%
	Allowance for loan losses to NPAs		79.84	%		58.17	%		49.80	%		45.51	%		46.16	%

Period End Balances:
	Assets	$	603,351		$	590,276		$	583,167		$	600,320		$	346,458
	Total Loans (before reserves)	$	338,635		$	335,563		$	329,080		$	335,195		$	221,628
	Deposits	$	534,019		$	522,463		$	516,498		$	532,844		$	295,010
	Stockholders' equity	$	56,895		$	55,110		$	53,779		$	54,488		$	39,229
	Common stock market capitalization	$	65,957		$	63,033		$	61,427		$	55,003		$	37,390
	Full-time equivalent employees		127			127			120			114			75
	Shares outstanding		8,043,517			8,029,691			8,029,691			8,029,691			5,842,145

Average Balances:
	Assets	$	598,933		$	583,909		$	589,896		$	523,785		$	345,348
	Earning assets	$	552,731		$	534,369		$	530,112		$	462,668		$	318,415
	Total Loans (before reserves)	$	339,062		$	332,487		$	331,806		$	288,558		$	221,608
	Deposits	$	522,443		$	516,107		$	514,366		$	411,676		$	294,645
	Other borrowings	$	11,028		$	11,198		$	11,446		$	11,628		$	10,933
	Stockholders' equity	$	56,305		$	54,673		$	53,800		$	49,134		$	38,753
	Shares outstanding, basic - wtd		8,039,567			8,029,691			8,029,691			7,292,583			5,842,145
	Shares outstanding, diluted - wtd		8,059,334			8,029,691			8,029,691			7,292,583			5,842,145

NON-GAAP FINANCIAL INFORMATION
(Unaudited)
	Three Months Ended
NON-GAAP PERFORMANCE MEASURES	Jun. 30, 2017			Mar. 31, 2017			Dec. 31, 2016
Return on average common equity, excluding acquisition related costs, net (1)		10.70	%		10.73	%		9.15	%
Return on average assets, excluding acquisition related costs, net (1)		1.01	%		1.00	%		0.83	%
Efficiency ratio, excluding acquisition related costs, net (2)		71.49	%		64.20	%		70.05	%


NON-GAAP EARNINGS PER SHARE
Basic (3)	$	0.19		$	0.18		$	0.15
Diluted (3)	$	0.19		$	0.18		$	0.15


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
	Three Months Ended
	Jun. 30, 2017			Mar. 31, 2017			Dec. 31, 2016
	(in thousands)
Net income	$	1,480		$	1,433		$	911
Acquisition related costs, net		40			52			496
Tax effect on acquisition related costs, net		(14	)		(18	)		(176	)
Net income, excluding acquisition related costs, net (3)	$	1,506		$	1,467		$	1,231


	Three Months Ended
	Jun. 30, 2017			Mar. 31, 2017			Dec. 31, 2016
	(in thousands)
Total non-interest expenses	$	4,799		$	4,128		$	4,911
Acquisition related costs, net		40			52			496
Total non-interest expenses, excluding acquisition related costs, net (3)	$	4,759		$	4,076		$	4,415




(1) The Company believes these non-GAAP ratios provide a useful metric with which to analyze and evaluate the financial condition of the Company
(2) The Company believes this non-GAAP ratio provides a useful metric to measure the operating efficiency of the Company
(3) The Company believes these non-GAAP measurements are a key indicator of the ongoing earnings power of the Company

Contact:

Brian M. Riley, President & CEO
Craig Wenner, EVP & CFO 
928 855 0000
www.mohavestbank.com

The Cereghino Group
IR CONTACT: 206-388-5785

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State Bank Corp. Reports Earnings of $1.48 Million, or $0.18 per Diluted Share, in 2Q17; Total Assets Exceed $600 Million

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